International initiatives attempting to promote better climate practices are hindered by the lack of ambition in corporate ESG transparency. US companies lag behind the ambition of regulators The Securities and Exchange Commissions made headlines in March by proposing new climate disclosure rules for listed companies in the United States. Concretely, large companies would be required to disclose their Scope 1 and 2 GHG emissions, certain financial statements, as well as qualitative and governance information within registration statements and annual reports. The proposed rule has faced resistance from corporate America, with business associations including the U.S. Chamber of Commerce, the Bank Policy Institute, the National Association of Manufacturers and the American Petroleum Institute asking the SEC to scale back on the required disclosures. This reaction is a reflection of how far behind large companies in the US are in terms of ESG transparency. A recent JUST Capital report found that only 57% of the 1,000 largest companies by market capitalization (the Russell 1000 Index) disclose their Scope 1 and 2 emissions. About 43% of them disclose their emissions reductions commitments; 30% disclose Scope 3 emissions from business travel; and only 11% and 7% disclose climate commitments in line with science-based targets for Net Zero by 2050 and 1.5°C temperature rise, respectively. Even Blackrock, an investment firm known for pushing companies in its portfolio to take climate action, wrote a letter to the SEC saying that its proposed rules risked increasing compliance costs for companies and creating confusion for investors. Considering the level of backlash, the SEC will likely have no choice but to reign in its regulatory ambition, keeping the level of ESG commitment in corporate America lower than in other parts of the world. Stricter ESG reporting requirements coming into force in the EU  In the European Union, large companies have been required to report on their ESG performance since 2018, when the Non-Financial Reporting Directive (NFRD) came into effect. The NFRD applies to all public interest companies with more than 500 employees, a balance sheet that exceeds €20 million or a turnover that exceeds €40 million – about 11,700 companies in total. As a result, 100% of companies included in the NFRD disclosed their GHG emissions in 2020, and 74% included their Scope 3 emissions in the report, according to the Climate Disclosure Standards Board.  Now, the EU is preparing to introduce the Corporate Sustainability Reporting Directive (CSRD), an updated version of the NFRD that increases its reach and scope. It is estimated that about 50,000 large and small companies in Europe will have to comply with the CSRD by the time it reaches full implementation in 2026. The new rules will require them to disclose detailed and audited information on their ESG impact, in line with the EU Green Deal and Green Taxonomy. More on this: Your guide to sustainability reporting in the EU Lack of information delays the publication of ESG benchmark in Spain and Italy UK ratings agency Standard Ethics is planning to create a sustainability index for mid-sized Spanish and Italian companies, but has been forced to delay it due to the scarcity of information disclosed. In a press release, Standard Ethics revealed that the publication of the ESG index has been moved from June to November 2022, “due to the additional time required by Standard Ethics’ analysts to complete a correct and more in-depth analysis of the Indices’ potential components given the complexity of locating the necessary public documentation”. Large companies in these countries do have a sustainability index, as they are already subjected to the rules of the NFRD and required to disclose information about their ESG impact. In Spain, the FTSE4Good IBEX Index identifies Spanish companies with leading corporate responsibility practices. Carbon footprint calculation: the first step towards ESG transparency If you are a company that hasn’t yet had to comply with ESG reporting requirements, now is the time to prepare. In order to disclose your emissions, the first step is to calculate them. Check out our guide to calculate your company’s CO2 emissions or get in touch with one of our experts to start the journey. Article written with contributions from Francisco Martín Rubio, head of ESG services at ClimateTrade.